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Joint Ownership Of Property - Jointly Owned Assets

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There is often confusion as to how jointly owned assets such as the joint ownership of property should be treated upon the death of one party and often people wrongly assume that the surviving owner takes all.

Types of Joint Ownership Of Property

There are two different ways of co-owning property: either as “joint tenants”, or as “tenants in common”.

If you own property as “joint tenants”, then on the death of one of the co-owners, the property will automatically pass to the owner by virtue of survivorship. If the property is jointly owned in this way it will pass by survivorship regardless of what may be in the individual’s Will.

Alternatively, if the property is owned as “tenants in common”, each co-owner owns their own individual share of the property. On death, that individual’s share will pass either in accordance with their Will or the intestacy laws if there is no valid Will.

Therefore, when buying a property, if you are considering joint ownership of the property you should seek advice as to which type of ownership will work best for you. This should always be considered in conjunction with making a Will, as some Will structures may require a property to be owned as tenants in common to work effectively.

Assets other than Property

Things are slightly more complex when looking at other types of jointly owned assets such as bank accounts as there can be problems in identifying the deceased’s interest in such accounts.

The case of Re Northall (deceased) [2010] EWHC 1448 (Ch) demonstrates the difficulties that can occur on the death of one party when funds have been placed in a joint bank account.  In this case the mother, Mrs Northall, had purchased a council house with one of her sons.  She subsequently sold the property and received a cheque for the sale proceeds of £54,836.00.  As she did not have her own bank account, one of her other sons opened an account in the name of himself and his mother so that she could bank the cheque.  Shortly afterwards payments of £28,625.00 were made out of the account by the son. 

Mrs Northall then died and the day after her death the son transferred the remaining balance in the joint account to an account he held jointly with his wife. The son claimed that his mother had authorised his withdrawals from the joint account, which were apparently made on her behalf, and that she said that he could keep any residue if she died. This claim however did not work in his favour as in fact it demonstrated that his mother was the beneficial owner of the funds in the joint account and such funds would therefore not pass by survivorship to the son just because he was the joint account holder.

The judge held that where one person puts money into joint names there is a presumption of a resulting trust in favour of the provider of the funds. Such a presumption can be rebutted in one of two ways, firstly if the circumstances give rise to a presumption of advancement, and secondly by evidence that the provider intended to transfer the beneficial interest. In the second instance, it would be up to the surviving son to prove this point.

The case highlights the importance of the intentions of the parties at the time of opening the joint account and evidence of such intentions. The bank forms which are completed when opening a joint account can be a key piece of evidence in showing the parties intentions. In this case however, although there was provision for survivorship on the account opening form, if was found that this was insufficient evidence as had not been drawn to Mrs Northall’s attention at the time of opening the account.  Accordingly, the son had no evidence to show his mother’s intention for him to benefit from the funds on her death and so was ordered by the judge to account for the balance of funds in the joint account at the date of death and any withdrawals made during Mrs Northall’s lifetime, unless there was evidence that these were made on her instructions.

It is common for children to open joint bank accounts with one of their parents, for example if their parent is elderly and has difficulties in dealing with their own affairs.  It is important that at the time of opening the joint account there is a clear indication of who the funds in the account belong to, the intention as to their use and the ultimate beneficiaries on death. 

In most cases it may be better for the parent to enter into a Lasting Power of Attorney, providing of course they have the sufficient mental capacity to do so.  This would allow them to appoint an Attorney of their choice to act on their behalf in dealing with their financial affairs. In this case there would be no need to open a joint bank account, as the Lasting Power of Attorney will enable the Attorney to access funds in the parent’s bank account for the parent’s benefit. This will ensure that it remains clear that the funds in the account belong solely to the parent and should be used for their benefit.

It is also worth noting that on joint bank accounts a joint mandate will fail if one of the account holders loses mental capacity. This would result in the account being frozen, causing administrative difficulties going forwards. This is another example of why it may be preferable for the parent to enter into a Lasting Power of Attorney, rather than creating a joint bank account, as the attorney can continue to access and use the parent’s account in the event that the parent loses mental capacity. If the individual in question has lost mental capacity before a Lasting Power of Attorney has been set up, you will need to take advice about applying to become a Property and Financial Affairs Deputy for that individual.

Other options for jointly owned assets

As set out above, it is advisable to consider putting in place a Lasting Power of Attorney or making an application for Deputyship if an individual is seeking to assist a relative with the administration of their affairs as this is the correct way to administer an asset belonging to a person who requires support or has lost mental capacity to deal with such an asset themselves.

Another option for people wishing to jointly own an asset, is the use of a declaration of trust. A declaration of trust can confirm the extent of each party’s respective beneficial interest in an asset and can also set out any express terms of ownership. For example, if a couple are purchasing a property but are contributing unequal amounts towards the purchase price, a declaration of trust can be used to set out not only the unequal shares of the jointly owned property but also what would happen on the subsequent sale of the property.

The key point is to give careful consideration to the ownership of any asset that is to be owned by two or more people jointly in order to avoid problems about the nature of each party’s interest at a later date.

If you would like more information about the the joint ownership of property, the passing of jointly owned assets on death, declarations of trust, Lasting Powers of Attorney, Deputyship or other mental capacity issues, please contact Christabel Clappison on 0113 288 5605 or christabel.clappison@clarionsolicitors.com

 

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